TITLE:
Piketty’s Capital-Income Theory Reconsidered for a Small Open Economy with Increasing Savings Rate
AUTHORS:
Yasunori Fujita
KEYWORDS:
Small Open Economy, Capital/Income Ratio, Kuznets Curve, Negative Savings Rate
JOURNAL NAME:
Open Journal of Statistics,
Vol.6 No.1,
February
14,
2016
ABSTRACT: Since Piketty offered a new view of capital/income ratio, numerous attempts have been made to examine the relationship between return on capital, economic growth and the capital/income ratio. This paper attempts to shed new light on this field. More precisely, following recent literatures that pay attention to dynamics of external balance sheets of countries, we examine if Piketty’s results for large countries are robust for a country that takes the world rate of return on capital as given and whose savings rate increases gradually from negative value. It is revealed that for such a country, (1) Kuznets curve is drawn and (2) capital/income ratio decreases in accordance with a rise in savings rate and return on capital.